Steve Sosnick, chief strategist of Interactive Brokers, spoke with Quartz for the latest installment of our “Smart Investing” video series.
Watch the interview above and check out the transcript below. The transcript of this conversation has been lightly edited for length and clarity.
ANDY MILLS (AM): - Q1 earnings have been pretty good so far. Next week, Nvidia reports. What are your predictions?
STEVE SOSNICK (SS): This company has been probably the best that I can think of. I can’t think of a precedent for a company that consistently beat its number, raised next quarter, beat the raised estimate, raised it again. This has just been beat, raised, beat, raise, beat, raise, phenomenal. And investors who’ve been on the bandwagon of this thing have done phenomenally. This stock is up multiples and unlike some of the meme stocks, which are up big, this one deserves it. It’s not a cheap stock, but it’s also not a wildly expensive stock. But the question we get into is maybe as we look back at why some of these companies missed, are we back to the old idea of the whisper number? And so the question then is, is there a whisper number out there for Nvidia that I’m not picking up that might have investors a little surprised.
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AM: Nvidia at times has almost single-handedly kept the market afloat or at least caused some volatility the day after their earnings. How do you see their earnings, if they disappoint, affecting the market overall?
SS: Oh, the sentiment will be terrible. That’s why I do think this is the key. I think they have to deliver. I hate to put such a burden on one company, but if they mildly under-deliver and let’s say the stock’s down 2% or whatever, no big deal. We’ll carry on the next day. If they say something that meaningfully changes the calculus… Let’s say they don’t raise, or if they do raise, it’s gonna be less than people had hoped. That can have a real psychological effect on the market. And that’s the worry for me, not so much is the number gonna be 552, 556, 550? It’s really gonna be can they continue this pattern of beat-raise and and do it and rinse and repeat at some point. It’s, it’s, it’s hard to imagine that they can do this infinitely.
AM: And I think it’s actually impossible.
SS: Right. Exactly.
AM: It’s just a matter of reality setting in at a certain point.
SS: Yeah. So when does it sort of go back to being a regular company, a regular, fast growing, high technology leading company? And does it put a damper on them just being the end all, be all phenomenal company that it has been. This is not to throw any shade on them. It’s really been a phenomenal company. But I think investors are gonna be listening very closely. Anybody should be sort of listening for signs that this run, I’m not gonna say comes to an end, but just that maybe their growth becomes more of a normal company’s growth pattern rather than this beyond exceptional company’s growth pattern.
AM: You are pretending like you don’t know what the whisper number is. You could tell me off-camera.
SS: I have to guess it’s somewhere above the published estimates, but I think the whisper I think is gonna be more the guidance. You know, can they continue to guide up? And if so, by how much? And that number I don’t really have a great handle on, but I do think that the market is expecting better guidance. And so the question is how much better do they tell us it will be.
AM: Gotcha. Well thanks a lot, Steve.
SS: My pleasure. This was a lot of fun.